SIG Reports Half-Year Loss; Expects Second-Half Improvement

SIG plc is a leading supplier of specialist building solutions to trade customers across Europe, with strong positions in its core markets as a market leading supplier of insulation and interiors solutions to the construction industry, and a specialist merchant of roofing materials for small to medium sized construction businesses. The Group today announces its half year results for the six months ended 30 June 2020. 

Strategic and operational highlights

·    New leadership team appointed

·    Successful restructuring of the Group's financing facilities and capital raise of £165m, concluded in July, including £83m equity investment by Clayton, Dubilier & Rice LLC

·    Post capital raise, substantial liquidity headroom provides security against ongoing market uncertainty and confidence to invest in new growth strategy, with a net cash position at 31 August of £29m, pre IFRS 16

·    Branch and customer-centric restructuring in the UK progressing to plan; Germany and Benelux also refocusing under new combined team

·    The Group has been able to trade safely, working closely and flexibly with our employees, customers and suppliers to adapt to new Covid-19 norms 

Financial results

·    Like-for-like H1 sales down 23.9% on prior year, impacted by Covid-19

·    Gross margin down 50bps due to lower volumes.  Group underlying operating loss of £43.2m (H1 2019: £29.1m profit)

·    Underlying LBT of £53.7m (H1 2019: £17.4m profit) and underlying loss per share of 9.1p (H1 2019: 2.1p earning per share)

·   Statutory loss before tax from continuing operations of £125.4m (H1 2019: profit before tax of £2.2m) reflecting £71.7m of Other items, including £42.8m of impairment of goodwill in the UK businesses, mainly reflecting the impact of Covid-19

·    Net debt, pre IFRS 16, down to £90.0m (H1 2019: £158.2m), helped by sale of Air Handling  division in January 

Current trading and outlook

·   Market fundamentals remain sound and near-term order books give an element of encouragement, but there remains significant economic uncertainty

·  Trading following initial estimates of immediate H1 Covid-19 impact was better than anticipated, and the Board now expects full year sales to be moderately higher than guided in May

·   H2 expected to remain loss-making, but at a lower rate than H1

·   Net cash outflow expected in H2 due to unwind of tax deferrals (government supported Covid-19 schemes) and cessation of some historical year-end and half-year working capital practices 

Commenting, Steve Francis, Chief Executive Officer, said:

"I would like to thank all our people for their resilience and commitment in the face of the very challenging circumstances of recent months, the effects of which clearly impacted our first half results. Providing a safe environment and instilling an even greater focus on good health and safety behaviours have been a major focus of the new management team.

"In mid-summer, we concluded the successful restructure of our financing facilities and a £165m capital raise. These, along with our careful management of working capital and cash in recent months, have created a sound financial base on which we can rebuild the business.

"The new management team has started to execute its strategy and implement its organisational model, which focuses on our local branch teams, enabling growth and returning to active industry leadership. As previously stated, the essence of our new strategy is re-connection with our people - employees, customers, suppliers and the communities in which we do business.  We are a local, sales and service-driven business. We firmly believe that our new strategy for growth will provide the basis, not only for the restoration of profit and strong cash conversion, but also serve as a foundation to play a leading role in our industry in the years to come.

"Long term fundamentals remain sound in the Group's markets across Europe.  In the short term, significant economic uncertainty remains in all of our markets, although government stimulus for the construction sector, notably in the UK, is welcome.

"Trading was better than anticipated during the peak lockdown months of March to May, compared to our initial estimates of the possible Covid-19 impact, and the Board now expects full year sales to be moderately higher than guided in May. Group sales in July and August were encouraging although down year on year, and market share losses during 2019, particularly in the UK distribution business, will take time to recover. The second half of 2020 is expected to remain loss making, but at a lower rate than the first despite some increased pressure on gross margin in the UK. 

"I am extremely encouraged by the energy and excitement with which our people have embraced the new strategy and by the initial progress made in a short space of time. 

"The Group demonstrated agility and resilience in the first half of the year, dealing with an unprecedented external challenge, and significant internal change and activity. Coupled with a strengthened balance sheet, the foundations are now in place for the business to grow."

Source : SIG PLC

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